Seeds of Wisdom RV and Economic Updates Saturday Morning 1-18-25

Good Morning Dinar Recaps,

BORROW WITHOUT SELLING: A LOOK AT COINBASE’S NEW BITCOIN LENDING SOLUTION

Coinbase has partnered with Morpho to launch a Bitcoin-collateralized USDC lending service on Base blockchain, allowing US users to borrow up to $100,000 without selling their Bitcoin.

▪️Coinbase and Morpho have partnered to offer Bitcoin-backed USDC loans up to $100,000 on the Base blockchain, with Bitcoin automatically converted to cbBTC as collateral

▪️The service is currently available to US customers (except NY state), with plans for global expansion, particularly targeting the EU market

▪️Interest rates are variable and determined by Morpho’s market-driven mechanism, with no fixed repayment schedule

▪️Loans are positioned as a tax-efficient alternative to selling Bitcoin, allowing users to maintain their crypto holdings while accessing liquidity

▪️The service has drawn mixed reactions, with critics raising concerns about centralization risks, auto-liquidation during price drops, and variable interest rates

Coinbase, a leading cryptocurrency exchange, has launched a new lending service that allows users to borrow USD Coin (USDC) using their Bitcoin as collateral.

The program, announced on January 16, 2025, emerges from a partnership with Morpho, a decentralized money market protocol, and operates on Coinbase’s layer-2 blockchain platform, Base.

The new service enables users to borrow up to $100,000 in USDC while retaining ownership of their Bitcoin. When users pledge their Bitcoin as collateral, it is automatically converted to Coinbase Wrapped Bitcoin (cbBTC) at a one-to-one ratio before being transferred to Morpho’s smart contracts.

Currently, the service is available to United States residents, except for those in New York State. Coinbase has indicated plans for international expansion, with the European Union marked as a likely next target market due to the alignment of USDC with MiCA regulations.

The lending process operates without a fixed repayment schedule, offering flexibility to borrowers. Interest rates are not fixed but instead fluctuate based on Morpho’s market-driven mechanism, which automatically adjusts rates according to market conditions.

One key feature of the service is its potential tax benefits. By borrowing against Bitcoin rather than selling it, users may be able to defer capital gains or losses, making it an attractive option for those seeking liquidity without triggering taxable events.

The borrowed USDC can be converted to US dollars without fees, opening up possibilities for various uses, including major purchases like cars or mortgage down payments. Users can also earn over 4% in rewards on their USDC and send it globally without additional costs.

Morpho’s involvement in the partnership brings substantial credibility to the program. The protocol has grown to become the 12th-largest decentralized application by total value locked, managing over $3.2 billion in 2024, representing a 444% increase in activity.

The introduction of this service follows Coinbase’s launch of cbBTC in September. Since its inception, cbBTC has accumulated a supply worth $2.1 billion, equivalent to 21,495.46 BTC, according to Dune Analytics data created by user eekeyguy.

Mixed Reception

The community response to the new lending service has been mixed.

While some users appreciate the additional financial flexibility, others have raised concerns about potential risks. Critics have pointed out the dangers of auto-liquidation during market downturns, where borrowers could lose their collateral if Bitcoin’s value falls below certain thresholds.

Several users have expressed wariness about centralization aspects of the service. The involvement of Coinbase as an intermediary and the use of wrapped Bitcoin (cbBTC) has led some DeFi purists to question whether the service aligns with decentralization principles.

The variable interest rate structure has also drawn attention. Rates are recalculated frequently, which could create uncertainty for borrowers trying to plan their finances. Some community members argue this variability might make the service less attractive for long-term borrowing.

Technical aspects of the implementation have come under scrutiny. The conversion of Bitcoin to cbBTC and its deployment through Ethereum-based DeFi protocols has raised questions about complexity and potential risks in the loan structure.

For monitoring purposes, users must keep track of their loan-to-value ratio to avoid liquidation events. This requirement places additional responsibility on borrowers to actively manage their positions, particularly during periods of market volatility.

@ Newshounds News™

Source:  Blockonomi

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SEC LAWSUITS THREATEN TO DELAY SOLANA ETFS IN U.S. UNTIL 2026

▪️James Seyffart, an analyst from Bloomberg Intelligence, mentioned that the U.S. SEC review process takes 240-260 days, which could delay the Solana ETF timeline until 2026.

▪️Five firms, including Grayscale, Bitwise, and VanEck, have applied for Solana ETFs, and the SEC is expected to make an initial decision on these applications within 45 days.

The approval of Bitcoin (BTC) and Ethereum (ETH) Exchange-Traded Funds (ETFs) in 2024 sparked excitement in the cryptocurrency industry, signaling growing institutional acceptance. 

However, amid this wave of enthusiasm, the spotlight now shifts to Solana (SOL) as five firms, Grayscale, Bitwise, VanEck, 21Shares, and Canary Capital, have submitted applications for spot Solana ETFs. As of now, these applications have yet to receive any official attention from the U.S. Securities and Exchange Commission (SEC).

In a January 16 interview, James Seyffart, an analyst at Bloomberg Intelligence, weighed in on the Solana ETF situation. Seyffart noted that while movements for a Solana ETF could gain momentum after Donald Trump takes office, the SEC’s prolonged review process might push the approval timeline into 2026. The SEC takes 240-260 days to review ETF filings, creating additional uncertainty around the potential launch.

These ETF applications have essentially been “denied outright” without acknowledgment, as per Seyffart’s comments. Despite the lack of progress on Solana ETFs, other cryptocurrency ETFs, such as those for XRP, continue to face regulatory hurdles.

A Shift in Regulatory Tone with Trump’s Inauguration

Seyffart pointed out that the approval process is complicated by ongoing lawsuits from the SEC against cryptocurrency exchanges. During Gensler’s 4 year tenure as SEC Chair, over 80 enforcement actions were taken, including lawsuits against major firms like Coinbase and Binance, primarily for violations related to unregistered tokens and unregistered exchange operations.

The departure of Gary Gensler on January 20, marks a significant shift in regulatory tone. Gensler’s leadership has been a point of contention within the crypto industry, and his exit is seen as an opportunity for change and crypto-friendly regulations. 

Trump has nominated Paul Atkins, a pro-crypto candidate, and a former SEC commissioner, to head the SEC. Reports also suggest that the SEC might suspend or dismiss pending cryptocurrency cases that do not involve fraudulent activities.

In 2024, several firms, Bitwise, WisdomTree, and 21Shares, pushed for approval of an XRP ETF, though no firm decisions have been made by the SEC on these filings.

This highlights the broader regulatory challenges that crypto assets continue to face in the U.S., with approval timelines for multiple ETFs remaining stalled.

On a more optimistic note, Eric Balchunas, a senior ETF analyst at Bloomberg, expressed hope for the potential approval of a Litecoin (LTC) ETF in the U.S. He believes that Litecoin has a strong chance of becoming the next spot cryptocurrency ETF to gain approval, signaling that other altcoins might eventually follow suit.  

While hopes for a Solana ETF have faded, Solana’s value has seen a notable increase, rising by 16.82% in the past week and by 4.81% in the last 24 hours, bringing its price to $220.

@ Newshounds News™

Source:  Crypto News Flash

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